Nothing makes a suburban American family sleep better than knowing the military is protecting them and the wise economists at the Federal Reserve are making all the right moves.
But if it’s close to being right, the number is a fraction of the 11 to 15 million homes estimated to be under water right now. It is a wonder that the foreclosure filings are not double or triple what are currently being filed.
Government has built a huge stake in the housing market since before the Great Depression, starting with Herbert Hoover’s “Own Your Own Home” initiative. Government has standardized suburban living through its mortgage guarantee guidelines. Government has provided the secondary markets to make 30-year mortgages and the securitization of those loans possible.
Owner-occupied housing not only provides employment, but each homeowner has a stake in their community and their country. An ownership society is a compliant society. Those with an ownership stake recognize the need for the kind of security that big government can provide.

…

Only 27.7% owned their homes in 1890. So, there were typically only two types of homeowners; the wealthy who paid cash and working folks who built their own homes. As Thomas J. Sugrue, history and sociology professor at the University of Pennsylvania points out, “even many of the richest rented—because they had better places to invest than in the volatile housing market.”
But after WWI, the federal government launched an “Own Your Own Home” campaign with the objective being to “defeat radical protest and restore political stability by encouraging urban workers to become homeowners,” Weiss writes.
In his book American Individualism, Herbert Hoover defined individualism stripped of the “the laissez faire of the 18th Century.” but instead viewed American individualism as Abraham Lincoln’s “ideal of equality of opportunity” and “fair division can only be obtained by certain restrictions on the strong and dominant.”

…

Disturbed that the 1920 census reflected a decline in home ownership, “Hoover offered a vigorous, new approach to the housing problem through the application of federal, voluntary, and business cooperative activity,” Janet Hutchinson writes in “Building for Babbitt: The State and the Suburban Home Ideal.” At Hoover’s direction the federal government threw its weight behind four organizations to promote home ownership: the commercial “Own Your Own Home Campaign” and Home Modernization Bureau, the nonprofit Better Homes in America Movement, and the professional Architect’s Small House Service Bureau. This concentrated effort served to foster, as Hutchison points out, “an idealized vision of American home life rooted in the ownership of a suburban residence replete with modern amenities.”
So while it may seem that Americans by their nature have genes that make them aspire to home ownership, this notion is nonsense.

The appetite created the products, not the other way around.
The broad distinction is that in some countries, home ownership is regarded as a good thing but not an essential. If you can afford it and if you prefer owning to renting, then by all means own your own home. If you can’t afford it or temperamentally don’t want to be tied down by a long-term, highly leveraged, highly illiquid investment, then so what, you rent. In other countries, however, home ownership is an unquestioned primary good. It implies safety, prosperity, full participation in society. Owning your own home could almost be seen as a fundamental right. It follows that in these countries, governments will pursue policies designed to increase home ownership. The United Kingdom and United States are two of those countries.
This isn’t exclusively, or even primarily, a preoccupation of the political left.

…

He’s trying to save his money to that he can get an apartment, but it takes time to get on his feet, it’s probably going to take him another month or two. He’s not looking to live in the Taj Mahal, he just wants a one-room apartment. So that’s it. If they’re lucky they get taken in by relatives, or they find a cash job and a renter who’ll take them in for cash. But mainly, nobody knows.”
And that’s where the dream of owning your own home, combined with innovative new financial derivatives, has brought us. This is the other end of the causal chain behind the bank collapses and the seizing up of credit.
It’s easy to lose money in the housing market. I’ve done it myself.
One of my most vivid memories of the late-1980s property bubble was how insanely boring it made so much conversation. There were dinner parties at which people spoke about literally nothing else, apart from the need to “get on the property ladder,” about the inexorable rise in prices, about the fascinating new developments such as the exciting new go-go financial product, the endowment mortgage.

…

The first is to do with that small word “own.” In practice, most of us own our home through a mortgage, which means that we don’t own our home at all. Back in the days of my first flat, you didn’t even hold the property deed of your own property if you had a mortgage: the bank held the deed. There was something brutal about that, but at least the point was stark: if you have a mortgage, you don’t own your own home, and it’s a good idea to remember the fact.
If you have a mortgage, though, your life is in thrall to a number: the interest rate. In continental Europe, policy wonks and bankers care what the interest rate is, but no one else does. Here, the interest rate has the potential to dominate your life. This is the single biggest reason why the United Kingdom has not joined the euro—because the British economy has cycles which aren’t exactly in phase with Europe’s and because the interest rate has such a directly personal effect on people’s finances here.

Marginal tax rates were way too high, racial inequality was rampant, water and air were far more polluted than they are today (at least in the United States), and tobacco companies promoted their products to children.6
Recent American history is full of examples of the government establishing a high-level goal in the interest of promoting social welfare, putting some sensible policies in place, and making it happen. One ongoing example is the push to encourage homeownership in the United States. Studies over time, not to mention common sense, suggest that communities where people own their own homes are safer, more stable, and attractive to investment.7 As far back as 1918, when the U.S. Department of Labor started a campaign called Own Your Own Home, federal and state governments have promoted this goal with tax policies, regulation of financial institutions, and direct support for homeowners.8
As President Johnson said in his proposal to create the Department of Housing and Urban Development (HUD) in 1968, “Home-ownership is a cherished dream and achievement of most Americans. But it has always been out of reach of the nation’s low-income families.

Before we can nurture the new industries of the future, develop new forms of health care and biotechnologies, or even explore new forms of education or more experiential forms of entertainment and recreation, we first have to free up capital by producing the goods of the old industrial order more cheaply and efficiently.
We’ve reached the limits of what George W. Bush used to call the “ownership society.” Owning your own home made sense when people could hope to hold a job for most or all of their lives. But in an economy that revolves around mobility and flexibility, a house that can’t be sold becomes an economic trap, preventing people from moving freely to economic opportunity. Not only has that piece of the American Dream grown dark, but it’s also clear that financial excess in the housing sector was one of the central causes of the economic crisis.

…

The percentage of Americans owning their home increased from 27 percent before 1920 to 45 percent by 1950, reaching more than 60 percent during the 1960s—the exact year my working-class parents bought a suburban home of their own.6 For my immigrant grandparents and their peers, the American Dream meant one thing: economic opportunity. But the Second Reset redefined and broadened that dream, making owning your own home a central part of it.
Most of all, home ownership radically transformed the way people consume. The amount of money the average family spent for food fell from almost half at the turn of the twentieth century to a third in 1950 and less than a fifth by the mid-1980s. Spending on basic needs—that is, food, shelter, and clothing combined—declined from more than three-quarters of family budgets at the turn of the century to less than half by 1960.

In fact, many financial organizations report that most (yes, most!)
Americans currently reaching retirement age—the infamous Baby
Boomers—have not planned or saved adequately for retirement.
Somehow over the last several decades—I believe since the
end of World War II—many people in our society have come to
believe many incorrect notions about money. These financial myths
include such ideas as:
•
•
•
•
“Owning your own home is everyone’s right.”
“The real estate market will always rise.”
“You can live ‘large’ on credit and never pay any consequences.”
“If you need to work, you can always find a job.”
These myths—a warped conception of the American Dream—
exploded in a puff of smoke in 2008. (In fact, they were eroding
for many years, but most people failed to heed the warnings.) As a
result, many people have suffered financially, some tragically.

…

(One caveat: If you use your savings or investments to pay off
your credit-card debt, you must not turn around and run up more
credit-card debt as soon as your cards are clear. Sooner or later,
you will run out of money, and you will find yourself in even worse
financial shape.)
Other Surprising Resources for Reducing Debt
If you do not want to raid your savings or money-market accounts,
you can consider other potential resources for putting your out-ofcontrol credit-card debt back in line. Here are a few suggestions.
Take Out a Home-Equity Loan If you own your own home and have sufficient equity, you might want to consider taking out a home-equity
line of credit and using it to pay off your credit-card debt. A homeequity loan helps you in several ways. First, by using the loan to pay
down the debt, you are trading 18 to 20 percent interest (on your
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Financial Independence (Getting to Point X )
credit cards) for 5 to 6 percent interest (on the home-equity loan).

An example of this inﬂuence of investment has already occurred in
the case of the promotion of homeownership in the United States.
Encouraging homeownership has long been a political priority in this
country because of the belief that homeowners are intrinsic stakeholders in society and that growing this group enhances the social stability
and economic aspirations of citizens. As early as 1918, the Department of Labor undertook an “Own Your Own Home” campaign, and
in public-private partnership thousands of Better Homes committees
promoted the advantages of home ownership in the 1920s.1 However, the government was most effective in encouraging home ownership through the promotion of ﬁnancial innovation in three different
phases, leveraging the power of ﬁnance to accomplish this social and
political goal.
The ﬁrst phase was the encouragement of a new mortgage structure, brought about by the National Housing Act of 1934.

Until we test ourselves,
though, these are just comforting stories. This is why the emerging
group of downshifters—people who have voluntarily reduced
their income—is so important. Each downshifter has, so to speak,
put their money where their mouth is.
The defenders of consumerism—the advertisers and the
neoliberal commentators, think-tankers and politicians—repeat
the comforting stories. It’s good to aspire to own your own home,
surround yourself with nice things, look after the needs of your
children, and save for your retirement. Yes, we are lucky that in a
17
AFFLUENZA
rich country such as Australia many of us can do these things, but
most people reach a point in their lives, some at eighteen and
some at 88, when they ask, ‘Work, buy, consume, die: is that all
there is?’ Each time someone asks such a question the market
shudders, because if there is more to life than earning and consuming the odds are that when people realise it they will devote
less time to paid work and consume less.

Here’s how far most home buyers take it: “I have to make a down payment of $50,000. My monthly expenses, including mortgage, taxes, insurance, and utilities, will be the same as they would be in a rental. So, in effect, for an investment of $50,000, I get to have my monthly housing costs work for me, building up my equity rather than my landlord’s. And I’m sure that I’ll get more than that $50,000 back when I sell the house.”
No doubt about it, owning your own home is usually a smart investment. But what buyers leave out of this line of reasoning is the opportunity cost of putting that $50,000 into the house. What else could you do with it? You could put that $50,000 into stocks or Treasury Bills, or you could use it to finish law school and increase your earnings, or you could travel around the world and write that novel that you hope will utterly change your life.

The president had dropped in on him to explain the problem of blacks and Latinos not owning their homes to the same extent as whites, and to tell him what he proposed to do about it. The number of members of various minority groups who owned their homes would be 5.5 million higher by 2010, and that would be achieved by means of Fannie, Freddie, federal loans, and government subsidies. In Bush's own words:
It means we use the mighty muscle of the federal government in combination with state and local governments to encourage owning your own home.'
Indeed, the Republicans endorsed virtually all the decisions made by Henry Cisneros and Andrew Cuomo-and upped the ante. Bush designed new federal subsidies for first-time buyers, whom he wanted to be covered by federal insurance even if they did not deposit a single cent as down payment. In 2004, it was time to set new targets for the government-sponsored enterprises. Cisneros had demanded that 42 percent of Fannie's and Freddie's mortgages go to low-income earners, and Cuomo had raised that to 50 percent.

There is a subtle, collusive process that is engaged in by both left and right to maintain the solidity of this structure. (Anyone would think class divisions are needed in order to maintain the sanctity of the political spectrum.)
Most people’s lives are sustained and at times improved through the application of large doses of pragmatism, both at an individual and a political level. One clear example of this is home ownership. The majority culture in Britain favours owning your own home, even though it has become less, not more common to do so. Many who favour renting, because of the flexibility it offers, eventually make the decision to buy a home if they can afford it simply because private renting in Britain is expensive, inconvenient and legally biased towards landlords as opposed to tenants. Some council tenants who believe that, in an ideal world, the Right to Buy should not exist have nevertheless bought their homes because they recognize the stability and the possibility of economic advancement it brings.

We were going to build a container for our moldy souls!
Dr. Greg came in and noted the piles of architectural literature. "What's going on here, then?"
Proudly, Dad told him the idea.
"The Great Australian Dream, huh?"
"Sorry?"
"I said, you're going to pursue the Great Australian Dream. I think that's a very good idea."
"What do you mean? There's a collective dream? How come nobody told me? What is it again?"
"Owning your own home."
"Owning your own home? That's the Great Australian Dream?"
"You know it is."
"Wait a minute. Haven't we merely appropriated the Great American Dream and just substituted the name of our country?"
"I don't think so," Dr. Greg said, looking worried.
"Whatever you say," Dad said, rolling his eyes so we both could see it.
A week later I went back. The books were open and pages torn up and scattered all over the room.

, but the fact that English people choose to burden themselves with a massive commitment of which many fellow Europeans are free illuminates something. It has to do with a sense that they are making an investment, that money borrowed to buy bricks and mortar is money that is working for them, unlike money spent on rent, which is working for the landlord. But it speaks to some deep sense of the importance of individual possession, too.
Historically, participation in the political life of the country depended upon owning your own home. Before 1832, you could only vote if you had property valued for land tax at more than forty shillings a year; and every time the franchise was extended in the nineteenth century, the right to participate in democracy was dependent upon being a male householder. The Abbey National Bank, originally a building society, began life as two organizations, one of which, the Abbey Road, had the declared ambition of enabling young men to buy their homes, in order that they could vote, while the National Building Society additionally hoped to convince them there were better things to spend money on than drink.

Is. Just. No. Way. I did a quick 180-degree turn and walked back to my rental.
Later that night, over a chicken curry with my friend Laura, I went into a rant about how much I hated that I could not afford a decent house in this city. Here I was about to turn 40, and I was still renting. What kind of success was a person if he was a tenant this late in life? Wasn’t it the American dream to own your own home, to live in a place that you loved and knew would be yours for decades to come?
I explained my dilemma. I could afford a nice house in a place that was less expensive than San Francisco, but I felt pressure to stay in this city. So many wealthy people were here that it would be suboptimal for Room to Read to have me live somewhere else. I could certainly afford a house in a city like Topeka, but I would not be spending time with venture capitalists and technology entrepreneurs if I lived there, and our budget would suffer.

Because Congress wanted to encourage home ownership and the values associated with it, it gave the homeowner two important tax breaks: (1) Although rent is not deductible from income taxes, the two major expenses associated with home ownership—interest payments on your mortgage and property taxes—are deductible; (2) realized gains in the value of your house up to substantial amounts are tax-exempt. In addition, ownership of a house is a good way to force yourself to save, and a house provides enormous emotional satisfaction. My advice is: Own your own home if you can possibly afford it.
You may also wish to consider ownership of commercial real estate through the medium of real estate investment trusts (REITs, pronounced “reets”). Properties from apartment houses to office buildings and shopping malls have been packaged into REIT portfolios and managed by professional real estate operators. The REITs themselves are like any other common stock and are actively traded on the major stock exchanges.

The Pros and Cons of Entrepreneurship
There's a big difference between doing what you love as a hobby and having it for a job. When you make a little money from your hobby (see Money-Making Hobbies), that's extra income, which is part of the fun. But when you flip the switch and it becomes your sole means of making a living, some of that fun vanishes—sometimes all of it disappears.
Working for somebody else is like renting an apartment, whereas working for yourself is like owning your own home; both have their rewards and drawbacks. Having to generate your own income can add a lot of stress to your life: You have to draft the business plan, find the customers, send the invoices, and pay the bills. Sure, there's pressure when you work for somebody else, too, but there's also a sense of freedom: You're not responsible for the daily decisions, and if you don't like the job, you can quit.

But Gramm always gave Fannie and Freddie a pass. Why? Because, like Johnson, Gramm saw the political fruit that homeownership could bear. According to a former banking committee staffer, the Republicans studied what it was that made people vote Republican. “The number one predictor of voting Republican was a job in the private sector,” he said. “Number two, and it’s a close second, is that you own your own home.” He adds, “Gramm preached that gospel to all who would listen.”
Then again, maybe Fannie’s tendency, as Maloni later put it, “to throw one brick too many rather than one brick too few” wasn’t so surprising after all. When you got right down to it, there was something about the GSEs’ business model that made no sense. Nobody in his or her right mind would establish a company whose competitive advantage was built on a guarantee that was nowhere written down and that no one could say for sure even existed.

Faced with the exhaustion of the nonmonetized commonwealth that it consumes, financial capital has turned to devour its own body: the industrial economy that it was supposed to serve. If income from production of goods and services is insufficient to service debt, then creditors seize assets instead. This is what has happened both in the American economy and globally. Mortgages, for example, were originally a path toward owning your own home free and clear, starting with 20 percent equity. Today few ever dream of actually one day repaying their mortgage, but only of endlessly refinancing it, in effect renting the house from the bank. Globally, Third World countries find themselves in a similar situation, as they are forced to sell off national assets and gut social services under IMF austerity programs. Just as you might feel your entire productive labor is in the service of debt repayment, so is their entire economy directed toward producing commodity goods to repay foreign debt.

Any reform of this nature faces an uphill battle as long as Corporate America, the mutual funds, and the banks are reaping huge financial benefits from the current 401(k) system and while politicians at the state and federal levels are pushing public employees away from the old lifetime pensions into 401(k)-style programs.
For a people-first program, it will take a populist revolt among baby boomers—the people who face possible poverty in retirement, unless the current system is changed.
CHAPTER 13
HOUSING HEIST
PRIME TARGETS: THE SOLID MIDDLE CLASS
Right here in America, if you own your own home, you’re realizing the American Dream…. That’s why I’ve challenged the industry leaders all across the country to get after it … by achieving the goal of 5.5 million new minority home owners.
—PRESIDENT GEORGE W. BUSH,
June 2002
I didn’t think I was in an economic position to buy a house. I didn’t think I made enough money…. It was a nightmare…. I was angry—angry at myself because I shouldn’t have believed the promises they made to me….

Since 2000, housing prices in the United States had increased dramatically, driven by a combination of low interest rates, a strong and growing economy, and an innate desire for home ownership. U.S. President George Walker Bush, a former investment banker, set out his administration’s agenda for “an ownership society in America” clearly on December 16, 2003: “We want more people owning their own home. It is in our national interest that more people own their own home. After all, if you own your own home, you have a vital stake in the future of our country.”1
Unknown to most, the housing boom was driven primarily by strong growth in the availability of money. Banks and mortgage brokers fell over themselves to lend to new homebuyers. Innovative mortgage products enabled people traditionally denied loans to borrow. George Bush was full of praise for the bankers and their new affordability products.

Are you men of vision? Think what Ford, Edison, Napoleon Bonaparte, and Julius Caesar would do. Obey that impulse. You can't lose. The town is coming this way. Listen carefully. Do you hear it? Swell. The new courthouse will be built on yonder hill, the undertaker and the village bakery will occupy handsome edifices of pressed brick just above you. Oyez, oyez, oyez. What am I offered? What am I offered? Own your own home in beautiful Homewood, within a cannonshot of all railway, automobile, and airplane connections. Running water abounds within a Washingtonian stone's throw and in all the pipes. Our caravans meet all trains. Gentlemen, here's your chance to make a fortune. The ground is rich in mineral resources--gold, silver, copper, iron, bituminous coal and oil, will be found in large quantities below the roots of all the trees."

The long months of tension had taken their toll, and on 19 February the Tories’ advertising team overstepped the mark with a particularly embarrassing example of hysterical scaremongering. On screen, pictures of Harold Wilson and James Callaghan dissolved to show the terrifying features of Michael Foot and Tony Benn, while a narrator warned that Labour would confiscate ‘your bank account, your mortgage and your wage packet’. ‘It wouldn’t take much more of a move to the Left,’ the commentary went on, ‘and you could find yourself not even owning your own home.’ On screen, a young couple’s house obligingly vanished. Not surprisingly, Wilson was furious, playing back the tape at his morning press conference to show how low the Tories had sunk. And not unreasonably the Nuffield study later called it ‘a sorry broadcast in its ethical blindness, its clumsy cascade of visual gimmicks, and its abysmal view of the electorate’s intelligence’. Even the Tory high command was embarrassed, and Wilson was only slightly mollified when Lord Carrington offered a formal apology.5
Oddly, however, the great flaw in the Conservative campaign was that in general it was not strident enough.

With the 1920s economic boom, white workers had the wherewithal to get the hell out of the tenements. Black workers did not.
Through no agency of their own, Chicago’s white ethnics were the beneficiaries of an urban-planning miracle. The National Association of Real Estate Boards—the same group that turned itself into a political machine to lobby against open occupancy in 1966—launched an “Own Your Own Home” crusade in the 1920s to coax families into putting down payments on single-family houses of their very own; simultaneously, idealistic reformers coming out of England’s Arts and Crafts movement devised a new form of cheap and felicitous housing unmatched in the history of the industrial working class: the urban “bungalow.” Squat, handsome, one-and-a-half-story single-family homes in sturdy brick, garden plots out front, each a happy marriage of community-building uniformity and dignity-enhancing individuality (families could choose their own geometrically patterned brickwork, limestone trim, colorful awnings, artistic leaded glass, even custom-toned mortar); plentiful sunlight; minimal traffic (garages were in the back alley); endless ribbons of common greensward out front for children to play; each neighborhood anchored by parish church and school; all manner of citizens’ bunds to join; lively neighborhood newspapers; attentive block captains under the discipline of Daley’s Democratic machine attuned to their every municipal need.

We couldn’t afford to furnish it. We had three stories of a dilapidated home, with a kitchen table, two chairs, a high chair, a bed, a crib, and two dressers, one of which had broken drawers.
About two weeks after we moved in, a friend stopped by. We stood talking on what would have been the lawn if grass had been growing there. My friend kept repeating how lucky I was and how nice it was to own your own home. But I didn’t feel lucky, and it didn’t feel nice. I didn’t know anyone else who owned a home like this.
I didn’t talk much about how I felt, but each night while my husband and daughter slept, I tiptoed down to the living room, sat on the floor and cried. This became a ritual. When everyone was asleep, I sat in the middle of the floor thinking about everything I hated about the house, crying, and feeling hopeless.

If you do not give the right measure of power to the right kind of people, then the wrong people will take more power than they need and they will use it the way they want, not the way you want.
Ladies and gentlemen, that's why your duty tomorrow to elect the right people to serve you is so important. Many of you operate your own businesses and you hire people to work for you. Most of you own your own homes, and sometimes you hire plumbers, electricians, carpenters to do work for you. You try to hire the right people for the work because you pay for that work, and you want it done right. When your child is sick, you try to pick the best physician-and you pay attention to what that doctor does and how well he or she does it. Why? Because there is nothing more important to you than the life of your child.

The Court reached a different conclusion, however, when asked to consider an East Cleveland, Ohio, zoning ordinance that, because of the way it defined “family,” did not permit a grandmother, her son, and two grandsons who were merely first cousins (not brothers) to live together. It struck down the ordinance as an impermissible intrusion upon the family.
Rules of the House: Co-ops and Condominiums. Some of your rights to do as you like in and with your home depend on the nature of your ownership. You have the greatest freedom when you own your own home. Landlords of rental properties are in a position to impose special restrictions on you, but these usually must be spelled out in your lease agreement. Cooperative and condominium owners agree to abide by rules that may be highly restrictive. Condominiums and cooperatives, for example, are permitted in some jurisdictions to forbid you to have long-term guests or roommates, or to operate a bed-and-breakfast in your home.